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Sunday, January 22, 2017

Is it better to rent or buy?

Here is a comparison of two similar apartments in a Brisbane inner suburb, in the same complex, with each apartment being side by side. These are good apartments, two bedrooms, two bathrooms, each 119 sqm total size, in a complex with a pool and gym. Both were sold for similar prices.

Thus, the renter is $890 a month or $10,680 a year better off, and had no capital outlays, and does not have to pay for repairs and improvements (usually another $100 a month on average). The renter can easily move to another location if work needs to take the renter there.

Another way to look at this is that the weekly rent should be $715 a week to cover all costs that are included in the rent. But the rent is only $510 a week. The landlord is subsiding the tenant to the tune of $200 a week.

2 comments:

Ummm, Jeff, the owner (who may not feel much like an owner at the start) is slowly acquiring an asset. I know some of the theorists say that the renter could be using the equivalent of the mortgage payments to cleverly invest in other assets, but most don't, and they end up living in (ugh!!) retirement villages, with nothing but other old people around them and two buses a day to a shopping mall which is beyond walking distance for most of them. At the age of 76 and living in my own home, surrounded by the normal cross-section of people of a range of ages (and gasping at the amounts they pay to buy into my street!), I am very glad I put up with a decade of comparative poverty while paying off the mortgage.

i think you're a bit off on the finance calcs sorry... even if our hypothetical resident borrowed 100% of the contract price, plus the stamp duty, plus the $8,000 renos... at a common current borrowing rate of 4.0% repayments for a P+I mortgage would be $2,300/mo. and about $700/mo of that is principal. so to compare it to back to renting, it is costing about the same.